Integrated Report 2021
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Disclosures concerning climate-related information (TCFD Recommendations)

Governance

Disclose the organization’s governance around climate-related risks and opportunities.

A number of analyses are carried out in the Bank to mitigate climate-related risks, based on the analysis of portfolio data. In addition to reports prepared for the day-to-day needs of the Bank’s management, risk monitoring is carried out through a formal system of limits and reports, implemented as part of the risk management system. The „Principles of ESG risk management at BNP Paribas Bank Polska S.A.” sets out the principles for monitoring and reporting risks, including climate risk.

Information on the level of ESG climate risk is submitted on a quarterly basis to the Risk Management Committee, the Bank’s Management Board and the Supervisory Board. ESG climate risk reporting focuses on presenting the results of assessments assigned in the credit process, based on information from ESG questionnaires. In addition, the Bank presents information on the results of the measurement of internal capital to cover ESG risk as compared to the limits applied in the capital plan. In quarterly cycles, information on the level of risk appetite in the ESG area is also provided. The Bank’s Management Board determines, and the Supervisory Board approves, the level of appetite for climate risk as well as the principles for measuring ESG risk, including climate risk, in the ICAAP process.

The level of determined appetite is subject to an annual review, the results of which are discussed at a meeting of the Management Board and Supervisory Board.

Chief Sustainability Officer, who heads the Sustainability Council, reports on climate issues directly to the CEO, who oversees the implementation of the strategic integration of climate considerations into the organisation’s activities.

By the end of 2021, the units responsible for sustainability and ESG activities (including climate issues) were the CSR and Sustainability Office and the Sustainability Programmes Office.

To underline the Bank’s role and commitment to building a sustainable economy, the Bank’s Sustainability Area has been operational since 1 January 2022, with the former Chief Sustainability Officer as Executive Director. The Area includes the Energy Transition Facilitation Department, the CSR (Corporate Social Responsibility) and Sustainable Finance Department and the Sustainability Strategy Implementation Support Team.

One hundred new recruitments are planned at BNP Paribas Group level in the area of sustainable finance within a dedicated global Low-Carbon Transition Group team consisting of 250 people across the Group.

The top management makes every effort to broaden its range of competences in the area of sustainability, climate change and climate policy at advanced international training courses (e.g. Cambridge Institute for Sustainability Leadership) and meetings with recognised experts and researchers. CEO Przemyslaw Gdanski graduated in 2021 from IE Business School in Madrid in Sustainability.

Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.

The Bank analyses the possible impact of climate change trends by identifying opportunities and risks to its business and growth perspective.

Climate change-related risks affecting the Bank’s business model, strategy and financial plan can materialise through three main channels:

  1. physical risks related to environmental degradation, such as air, water and land pollution, deforestation (these phenomena may lead, for example, to damage to infrastructure, destroyed crops, reduced yields or indirect consequences such as disrupted supply chains), and climate change, including the occurrence of:
    1. extreme weather events, including storms, floods, fires, heat waves, that can damage production facilities and disrupt supply chains,
    2. long-term climate change which may lead, inter alia, to increased temperatures, changing precipitation patterns and types, rising sea levels, reduced water availability, loss of biodiversity, and changes in soil productivity,
  2. risk of transformation resulting from the need to adapt the economy to gradual climate change, in particular the use of low-carbon and more environmentally sustainable solutions; these risks may materialise, inter alia, through the need to adapt to new regulations and technological changes, but also market risks resulting from disruption of the current structure of demand and supply of electricity, natural resources, products and services provided, including the occurrence of:
    1. regulatory risks (changes in climate and environmental policies, such as energy efficiency requirements, carbon pricing mechanisms that increase the price of fossil fuels, or policies that encourage the sustainable use of environmental resources),
    2. technological risks (a technology with a less damaging effect on the climate or on the environment replaces a more damaging technology, rendering it obsolete) that may be associated with failed investments in new technologies,
    3. changes in market sentiment and social norms (changing consumer and investor choices, difficulties in maintaining relationships with customers, employees, business partners and investors, due to the reputation of the company having a negative impact on the climate and the environment),
  3. responsibility and reputational risks arising from the Bank’s exposures to counterparties that could potentially be held liable for the negative impact of their activities on environmental, social and corporate governance factors (e.g. indemnification for losses).

For more information, please refer to Environmental perspective chapter, in the section concerning Climate risk management.

In order to reduce the risk of customers, the Bank through its credit policy should support their activities related to reducing energy intensity, thermomodernisation of buildings, increasing efficiency in the use of other key resources (water). The Bank should also not finance projects that significantly increase the risk of climate change and/or are significantly exposed to the effects of climate change.

The strategy should focus on opportunities and provide resilience against risks that may have a financial impact, including an impact on strategic planning and risk management, but also a non-financial impact. Proper management of climate risk presents strategic opportunities for the Bank. These opportunities primarily relate to reducing the exposure of the banks’ assets to climate change risks, including taking a long-term view related to mitigating material risks before their adverse impact occurs. In addition, the Bank’s activities can contribute to resource efficiency, including, inter alia, the use of more efficient modes of transport, production and distribution processes, the use of recycling, the use of more efficient buildings, or the reduction of water consumption. Skilful use of opportunities will allow for the redesign of business models and upgrading of technologies, including the use of low-carbon energy sources, the development of low-carbon goods and services, the development of climate change adaptation solutions, the development of new products or services through R&D and innovation.

In the new strategy for 2022-2025, the Sustainability Area is an integral part of BNP Paribas Bank’s strategy, with commitments to develop sustainable, including green products, their sales volumes, as well as to mitigate ESG risks within the financed portfolio and reduce greenhouse gas emissions.

At the same time, we are perfectly aware that in order to fully implement a strategy that would be fully consistent with the assumptions of sustainability, it is necessary to set up dedicated teams in this area. At the level of BNP Paribas Bank Polska S.A., as of 1 January 2022, we have established a dedicated Sustainability Area managed from the level of the Executive Director. The Area includes the Energy Transition Facilitation Department, the CSR (Corporate Social Responsibility) and Sustainable Finance Department and the Sustainability Strategy Implementation Support Team.

At the same time, recognising the bank’s key role in financing the economy, BNP Paribas Bank is constantly working to fully identify the climate change impacts of the financed economic sectors.

In the short to medium term, the impact of climate protection support activities on financial performance will remain neutral. The scale of financing for new investments will help cover the gap associated with the discontinuation of support for certain industries. The interest rates on such agreements are often preferential and may have a negative impact on the interest margin. It should be noted, however, that we are often dealing with agreements with additional guarantees from external institutions. This has a positive effect on the risk level and RWA (Risk Weighted Assets) and thus translates into lower capital intensity. As a result, the return on capital remains favourable and the shareholder will not experience a negative change.

In the long term, the benefits of sustainable financing should clearly prevail, due to the lower cost of risk when compared to the most exposed industries. The Bank’s commitment to promoting climate transformation and associating the Bank’s brand with this area should also have a positive impact on building long-term relationships with clients, who will increasingly appreciate the need for such changes.

Risk Management

Disclose how the organization identifies, assesses, and manages climate-related risks.

In 2021, in response to the requirements of the EBA/GL/2020/06 Guideline of 29 May 2020 on loan origination and monitoring, the Bank developed ESG assessment questionnaires, which were implemented in the credit process. In this way, the Bank verifies that customers take climate-related risks and opportunities into account. The assessment is designed to identify the negative impact of physical and transition risks on customers’ operations. In addition, the Bank includes in its analysis an assessment of climate change-related opportunities, including:

  1. use of electricity from renewable energy sources,
  2. implementation of a plan to reduce greenhouse gas emissions,
  3. implementation of a plan to reduce electricity and water consumption or to diversify into renewable energy,
  4. taking action to reduce the impact of climate change on its activities.

The Bank’s approach to ESG risk analysis is focused on assessing two perspectives:

  1. the impact of the economic activity on the environment,
  2. the impact of the environment on the economic activity.

The two perspectives presenting the impact of economic activity on the environment and the environment on economic activity are referred to as „double materiality”. They are considered to be interrelated, as reducing the negative impact of the business on the environment in the long term should result in reducing the negative impact of the environment on the economic activity.

In 2022, the Bank plans to further develop its ongoing analyses in order to identify more accurately which risks and opportunities could have a material financial impact on the Bank (based in particular on the sectoral and geographical location of its clients).

For more information on the management of ESG risks, please refer to the Management foundations chapter, in the section concerning ESG risk management and subsection on Risk identification process.

The climate risk management process is defined by the Bank in detail in the Principles of ESG Risk Management at BNP Paribas Bank Polska S.A. The Principles constitute a synthesis of actions undertaken by the Bank in the area of ESG management, in the context of impact on credit risk and internal capital of the Bank. By determining the risk appetite, the Bank limits exposures to customers with high ESG risk. The designated risk appetite aims to determine the level of risk that the Bank is prepared to accept in pursuit of its strategic objectives and financial plans. Additionally, as part of the ESG assessment, the Bank verifies whether the Borrowers have implemented/are planning to implement solutions to protect their business from the negative effects of climate change.

As set out in the Risk Management Strategy, ESG risk means the risk of loss arising from the current or future adverse impact of environmental, social or governance factors on the Bank’s counterparties or invested assets, which includes, but is not limited to, environmental risk – the risk arising from the institution’s exposures to counterparties potentially adversely affected by environmental factors, including factors arising from climate change and factors related to environmental degradation.

In order to manage climate change-related risk, the Bank has incorporated into its loan origination and monitoring process an assessment of the impact of long-term climate change and extreme weather events on the activities carried out by Borrowers, in accordance with a systematisation that introduces a division into:

  1. long-term climate changes:
    (a) impact of higher temperatures (air, fresh water, sea water),
    (b) impact of thermal shocks,
    (c) impact of changing wind patterns
    (d) impact of changing precipitation patterns and types (rain, hail, snow),
    (e) impact of sea level rise,
    (f) impact of water stress (limited access to fresh water),
    (g) impact of soil and coastal erosion
    (h) impact of soil degradation.
  2. extreme weather conditions:
    (a) impact of heat waves,
    (b) impact of cold waves,
    (c) impact of fires,
    (d) impact of storms, tornadoes, etc,
    (e) impact of drought
    (f) impact of heavy precipitation (rain, hail, snow/ice),
    (g) impact of floods,
    (h) impact of landslides.

The breakdown of the above risk types was implemented on 30 June 2021, with the entry into force of the EBA/GL/2020/06 Guideline of 29 May 2020 on loan origination and monitoring. In determining the risk types, the Bank followed the guidelines set out in the EBA Report on the Management and Supervision of ESG Risks for Credit Institutions and Investment Firms (EBA/REP/2021/18), as well as the risk types indicated in the Draft Implementing Standards on prudential disclosures on ESG risks in accordance with Article 449a of CRR (EBA/CP/2021/06 Draft Implementing Standards on prudential disclosures on ESG risks in accordance with Article 449a of CRR).

In addition, the Bank pays particular attention to the financing of sectors considered sensitive in terms of ESG risks (including climate-related risks) and limits its participation in industries widely considered to be particularly damaging and incompatible with sustainability.

The Bank, in line with the BNP Paribas Group Policies, distinguishes nine sectors that are particularly sensitive in terms of ESG risks: coal power, mining, defence and security, forestry (wood pulp, palm oil), nuclear, agri-food, fuel for unconventional oil and gas resources and tobacco.

In each of these sectors, the Bank implements CSR Policies and principles towards the Customers operating in them. All current and potential Customers of the Bank operating in these sectors are informed about the CSR Policies. To become a client of the Bank or obtain financing, an entity must fulfil a number of requirements regulated in the Policy for a given sector. With regard to sectors that are particularly harmful from the point of view of sustainable development, the Bank makes strategic decisions to withdraw from serving clients belonging to these sectors.

CSR sector policies are described in detail in the Business Perspective chapter.

For more information, please refer to Management foundations chapter, in the section concerning ESG risk management and subsection Risk management process.

As a result of the recognition of ESG risk (which includes climate-related risks) as material to the Bank in 2020, it became necessary to include the impact of environmental factors, among others, in the traditional risk management model. Based on this, ESG risks have been included in the Risk Management Strategy and Risk Appetite. In order to mitigate and control the risks, the principles for measuring ESG risks (including climate-related risks) in the process of determining the Bank’s internal capital (ICAAP) were also developed. The capital plan of BNP Paribas Bank Polska S.A. for 2022-2025 was supplemented with limits for ESG risk determined based on the risk measurement performed.

The Bank seeks to explore interdependencies between risk categories, which includes ESG risk (which includes climate-related risks). In this context, ESG risks are analysed in relation to business, reputation and credit risks. In order to ensure the highest standards in the process of identifying, assessing and managing climate-related risks, the Bank takes into account all existing and emerging regulatory requirements in this area.

Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

The Department of Economic and Sectoral Analysis takes into account the ESG risks of individual industries (and the value chains of these industries) both in assessing their risks and the potential demand for green investments by actors in these industries.

Entities in industries that are most affected by climate change and/or most vulnerable to climate change impacts should be most interested in investments that mitigate these risks in the short, medium and long term. These investments may to a large extent require financing from external sources such as a bank loan.

The Bank identifies nine sectors that are particularly sensitive in terms of ESG risks. In each of these sectors, the Bank implements CSR Policies and principles with regard to clients operating in them. In order to become a client of the Bank or obtain financing, an entity must meet a number of requirements regulated by the Policy for a given sector.

In addition to the regular analysis of risks in particularly sensitive sectors, an ESG risk assessment is carried out as part of the lending process to corporate clients from 2019. All participants in the credit process assess ESG risks, including the CIB and Corporate Clients Risk Division as the second line of ESG risk control. The process has been systematised and made more detailed through the implementation of the EBA/GL/2020/06 guidelines for lending and monitoring.

Accordingly, since 30 June 2021, an ESG risk analysis is performed for each new financing or increase in financing.

As part of its strategy implementation, the Bank monitors a number of strategic KPIs, the performance of which is presented quarterly to the Management Board and the Supervisory Board. These include KPIs dedicated to climate risks, including targets for the reduction of the Bank’s CO2 emissions. The Bank’s strategic approach to reducing its carbon footprint resulted in a 46% reduction in CO2e emissions from operations compared to 2019. The increase in greenhouse gas emissions in 2021 compared to 2020 is due to the gradual return of employees to the offices following the removal of the restrictions related to the coronavirus pandemic.

The organisation’s carbon footprint includes the total sum of greenhouse gas emissions caused directly or indirectly by the organisation.

Greenhouse gas emissions at BNP Paribas Bank Polska S.A. in 2021

XLS
GHG emission source emissions
[TONNES CO2E] 2020		 emissions
[TONNES CO2E] 2021		 2021 VS 2020 [%]
Scope 1
Petrol 2,914 2,964 1,72%
Gas 979 1,126 15,02%
Diesel 1,254 998 -20,41%
Heating oil 52 35 -32,69%
Refrigerants 50 166 232 %
Scope 2
Thermal energy 3,581 5,113 42,78%
Electricity 0 0 –
Scope 3
Business trips
Train 90 14 -84,44%
Car 245 279 13,88%
Aircraft 151 36 -76,16%
Scopes 1 + 2 + 3
Market-based 9,316 10,731 15,19%

 

The carbon footprint of paper consumed in 2021 by the Bank at its headquarters and branches was 101.3 tonnes of CO2.

Greenhouse gas emissions in the BNP Paribas Bank Polska S.A. Capital Group in 2021

XLS
GHG emission source emissions
[TONNES CO2E] 2020		 emissions
[TONNES CO2E] 2021		 2021 VS 2020 [%]
Scope 1
Petrol 2,914 2,964 1,72%
Gas 979 1,126 15,02%
Diesel 1,254 998 -20,41%
Heating oil 52 35 -32,69%
Refrigerants 50 166 232 %
Scope 2
Thermal energy 3,614 5,172 43,11%
Electricity 0 0 –
Scope 3
Business trips
Train 90 14 -84,44%
Car 245 279 13,88%
Aircraft 151 38 -74,83%
Scopes 1 + 2 + 3
Market-based 9,349 10,792 15,43%

 

The increase in greenhouse gas emissions in 2021 compared to 2020 is due to the gradual return of employees to the offices following the removal of the restrictions related to the coronavirus pandemic. The Bank’s consistent, strategic approach to reducing its carbon footprint resulted in a 46% reduction in CO2e emissions from operations compared to 2019.

Method of presenting indicators

  • The Bank has adopted reporting periods consistent with those applied by the BNP Paribas Group. Data showing energy consumption, emissions and business trips cover the period from 1 November to 31 October of a given year.
  • Conversion of fuel consumption into energy expressed in GJ was conducted with the employment of heating values published in the KOBIZE document „Heating Values and CO2 Emission Factors in 2016” for reporting under the Emission Trading Scheme for 2020 and the analogous document for reporting emissions for 2021.
  • Emissions calculations were prepared in accordance with the following standards: The Greenhouse Gas Protocol A Corporate Accounting and Reporting Standard Revised Edition, GHG Protocol Scope 2 Guidance, and Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
  • The greenhouse gases identified and included in the calculations were CO2, CH4 and N2O, which were expressed as CO2 equivalents. No biogenic CO2 emissions were identified.
  • The reference point for reduction targets is the 2019 emissions, which was the first year when the new approach to calculating GHG emissions was used.
  • The sources of emission factors were publications of KOBIZE (National Balancing and Emission Management Centre), the Energy Regulatory Office and the DEFRA (Department for Environment, Food and Rural Affairs, UK Government) database.
  • The 'refrigerants’ category includes R410A and R32 in 2020 and R410A and R422D in 2021 as reported to the CRO (Central Register of Operators) and converted according to GWP (Global Warming Potential).
  • As a criterion for the consolidation of emission volumes for the Capital Group, a financial control criterion was adopted, which means that 100% of the company’s emissions were attributed to the Group (excluding emissions from the combustion of fuels by the fleet and business trips in subsidiaries).
  • Emissions from fleet fuel combustion and business travel in subsidiaries are included for the first time in 2021, Inclusion does not materially affect the result.

As part of its strategy implementation, the Bank monitors a number of strategic KPIs, the performance of which is presented quarterly to the Management Board and the Supervisory Board. These include KPIs dedicated to climate risks, including targets for the reduction of the Bank’s CO2 emissions and the level of sustainable assets.

In the new strategy for 2022-2025, the Sustainability Area is an integral part of BNP Paribas Bank’s strategy, with commitments to develop green products, their sales volumes as well as to reduce greenhouse gas emissions.

The pursuit of positive environmental impact is one of the BNP Paribas Group’s objectives and sustainable finance is set to be a key driver of the Group’s next strategic plan.

Under the Net-Zero Banking Alliance (NZBA), as a Group we have committed to:

  • adaptation of the level of greenhouse gas emissions generated by own-account lending and investment activities to the pathway necessary to achieve climate neutrality in 2050 (temperature increase limited to 1.5° C)
  • acting on credible transition scenarios published by recognised institutions (IPCC, IEA);
  • focus on the sectors that emit the most greenhouse gases and play a key role in the transition to a carbon-neutral economy;
  • setting interim targets no later than 2030
  • publish information on progress and action plans on an annual basis.

The Bank accelerates the financing of all activities that promote the decarbonisation of the economy, by setting ambitious – and regularly exceeded – renewable energy financing targets and actively investing in green technologies. In Poland alone, green financing provided by the Bank exceeded PLN 3.8 billion in 2021.

The BNP Paribas Group is also one of the leading financial institutions when it comes to issuing green bonds and sustainability bonds on the global market, as well as working capital facilities with interest rates linked to the achievement of sustainability objectives (Sustainability Linked Loans).

The Bank’s results for 2021 are included in the table on the Description of the Bank’s activities carried out under the objectives of the Fast Forward Strategy and its integral part, the CSR and Sustainability Strategy.

Method of presenting indicators:
The Bank assumes that the short-term perspective is up to 1 year, the medium-term perspective is 1-5 years and the long-term perspective is more than 5 years

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